CITIC Securities released its report for the first quarter of 2024. In the first quarter of 2024, the company achieved operating income of 13.755 billion yuan, a year-on-year decrease of 10.38%; realized net profit of 4.959 billion yuan, a year-on-year decrease of 8.47%; achieved basic earnings per share of 0.32 yuan/share, a year-on-year decrease of 11.11%; and a weighted average return on net assets of 1.88%, a year-on-year decrease of 0.19 pct. The decline in revenue is mainly due to the sharp decline in investment banking business due to the impact of the cycle.
The investment banking business is under pressure, and proprietary investment is being dragged down. The company achieved investment banking revenue of 869 million yuan in the first quarter, a year-on-year decrease of nearly 50%. Affected by the listing policy, the amount of the company's equity financing fell from 64.1 billion yuan to 19.2 billion yuan, which is higher than that of peers; judging from bond financing, the company's general underwriting finance increased slightly by 4%, and its market share increased by 0.5 pct to 14.38%. The company issued a warning letter due to the supervision of a convertible bond project, and the investment banking business is being restructured and transformed. The company achieved investment business revenue of 5.460 billion yuan, a year-on-year decrease of 17.44%. The main reason was that equity market performance was sluggish in January, compounded by a high year-on-year time period base. In the future, the company will continue to increase its non-directional layout and reduce the impact of cyclical factors.
Brokerage declined slightly, and credit declined by nearly 50% year over year. The company achieved brokerage revenue of 2,442 billion yuan in the first quarter, a year-on-year decrease of 5.78%, mainly due to market factors; it achieved credit business revenue of 325 million yuan, a year-on-year decrease of 44.18%, mainly due to increased debt-side financial costs. As the company's debt structure continues to be optimized, debt-side costs are expected to decrease.
Promote public offering license applications and strengthen wealth management. The company achieved asset management revenue of 2,358 billion yuan in the first quarter, a year-on-year decrease of 5.59%. The company has a total of 14.2 million “e-investment” customers, increasing its global layout through the Hong Kong Family Office and Singapore wealth management platform. At the same time, the company is actively promoting public offering license applications and continuing to complete the asset management product system.
Increased leverage levels and optimized debt structures. Compared with the end of 2023, the company's total assets increased by nearly 8% in the first quarter, exceeding 1.5 trillion yuan, and the leverage ratio increased 0.17pct to 4.52 times. The company issued various types of corporate bonds and perpetual subprime bonds totaling 24.4 billion yuan, continuously optimizing the debt structure, strengthening the unified scheduling and management of the company's domestic and foreign capital, and optimizing the cross-border investment business system.
Investment advice: Based on the continued pressure on the investment banking business and the impact of new regulatory regulations on the securities industry, our profit forecast for 2024-2026 was lowered by 6.0%/5.8%/5.6%, respectively. We expect the company's net profit to be 213.0/234.5/25.24 billion yuan in 2024-2026, up 8.0%/10.1%/7.6% year over year. The PE corresponding to the current stock price is 13.3/12.1/11.3x, and PB is 1.1/1.0/1.0x. As a leading brokerage firm, the company has strong comprehensive strength and continues to lead the ROE level industry. We maintain the company's “buy” rating.
Risk warning: Market decline brings uncertainty to brokerage performance and valuation repair; financial supervision is becoming stricter; market competition is intensifying; innovation is falling short of expectations, etc.